Correlation Between Success Electronics and SAIC

Can any of the company-specific risk be diversified away by investing in both Success Electronics and SAIC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Success Electronics and SAIC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Success Electronics and SAIC Motor Corp, you can compare the effects of market volatilities on Success Electronics and SAIC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Success Electronics with a short position of SAIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Success Electronics and SAIC.

Diversification Opportunities for Success Electronics and SAIC

0.5

Correlation Coefficient

Success Electronics  SAIC

Very weak diversification

The 3 months correlation between Success and SAIC is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Success Electronics and SAIC Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAIC Motor Corp and Success Electronics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Success Electronics are associated (or correlated) with SAIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAIC Motor Corp has no effect on the direction of Success Electronics i.e., Success Electronics and SAIC go up and down completely randomly.

Pair Corralation between Success Electronics and SAIC

Assuming the 90 days trading horizon Success Electronics is expected to under-perform the SAIC. But the stock apears to be less risky and, when comparing its historical volatility, Success Electronics is 1.23 times less risky than SAIC. The stock trades about -0.13 of its potential returns per unit of risk. The SAIC Motor Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,807  in SAIC Motor Corp on October 9, 2024 and sell it today you would earn a total of  52.00  from holding SAIC Motor Corp or generate 2.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Success Electronics  vs.  SAIC Motor Corp

Success Electronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Success Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Success Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

SAIC Motor Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAIC Motor Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SAIC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Success Electronics and SAIC

The main advantage of trading using opposite Success Electronics and SAIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Success Electronics position performs unexpectedly, SAIC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SAIC will offset losses from the drop in SAIC's long position.

The idea behind Success Electronics and SAIC Motor Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.